AKITA Drilling Ltd. Announces Second Quarter Results

CALGARY, July 30 /CNW/ - AKITA Drilling Ltd.'s net loss for the three months ended June 30, 2010 was $567,000 ($0.03 loss per share) on revenue of $19,357,000 compared to net earnings of $555,000 ($0.03 per share) on revenue of $17,881,000 in 2009. Funds flow from operations for the quarter ended June 30, 2010 was $3,758,000 compared to $2,750,000 in the corresponding quarter in 2009.

Earnings for the six months ended June 30, 2010 were $448,000 ($0.02 per share) on revenue of $52,592,000. Comparative figures for 2009 were earnings of $4,463,000 ($0.24 per share) on revenue of $59,577,000. Funds flow from operations for the period was $10,824,000 compared to $14,801,000 in 2009.

Operating statistics for the first six months of 2010 and 2009 are as follows:

    
    -------------------------------------------------
                          Number of Rigs   Operating
                                              Days
                           Gross     Net
    -------------------------------------------------
                    2010     37     34.225     2,556
       Canada      ----------------------------------
                    2009     39     36.225     2,067
    -------------------------------------------------
                    2010      2       1.0         18
    United States  ----------------------------------
                    2009      2       1.0        210
    -------------------------------------------------
                    2010     39     35.225     2,574
        Total      ----------------------------------
                    2009     41     37.225     2,277
    -------------------------------------------------
    

Demand for rigs having certain capacities, particularly for heavy doubles and light triples increased during the second quarter. This increase in activity was offset by revenue rates that fell throughout most of last year and have not yet recovered to levels that were comparable to rates at the beginning of 2009. Consequently, earnings and funds flow are lower than comparative figures for 2009. Wet weather, particularly in June, delayed the start-up of a number of rigs until the third quarter. This also had an adverse impact on results.

Demand for conventional (i.e. non-pad or specialized) rigs has improved, but remains far below supply. The categories of rigs that are most affected include deep (i.e. 5,000 metre plus capacities) and shallow (i.e. under 1,500 metre capacities), as these rigs typically drill for natural gas in conventional formations. As a result of low natural gas prices, limited opportunities for work are available.

The Company continues to receive inquiries about expanding its pad drilling capabilities. Earlier this year, AKITA retrofitted two of its smaller rigs (2,000 metre and 2,200 metre capacities) to perform pad drilling for a specialized project that is expected to commence during the third quarter. In addition, AKITA is upgrading one of its existing rigs into a 4,000 metre pad rig for heavy oil or shale gas drilling. Management anticipates that pad rig demand should remain strong for the foreseeable future.

Selected financial information for the Company is as follows:

    
    Consolidated Balance Sheets

    -------------------------------------------------------------------------
    Unaudited                                      June 30        December 31
    ($000's)                                  2010        2009        2009

    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Cash and cash equivalents            $  39,533   $  55,032   $  34,142
      Term deposits                           18,000           -   $  18,000
      Accounts receivable                     22,384      20,828      28,523
      Income taxes recoverable                   653       1,008         330
      Other                                    1,009       1,962         421
                                           ----------------------------------

                                              81,579      78,830      81,416
    Restricted cash                            2,500       5,000       5,000
    Capital assets                           144,862     152,032     147,799
                                           ----------------------------------

                                           $ 228,941   $ 235,862   $ 234,215

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued
       liabilities                         $   7,252   $   7,747   $  10,123
      Dividends payable                        1,267       1,276       1,277
      Deferred revenue                         1,626       2,830         197
      Current portion of pension
       liability                                   -         268           -
                                           ----------------------------------

                                              10,145      12,121      11,597
    Future income taxes                       19,541      19,952      20,041
    Pension liability                          1,180       3,622       1,131
                                           ----------------------------------

                                              30,866      35,695      32,769
                                           ----------------------------------
    CLASS A AND CLASS B SHAREHOLDERS'
     EQUITY
    Class A and Class B shares                23,199      23,359      23,376
    Contributed surplus                        2,343       2,271       2,271
    Accumulated other comprehensive
     income                                     (379)       (252)       (354)
    Retained earnings                        172,912     174,789     176,153
                                           ----------------------------------

                                             198,075     200,167     201,446
                                           ----------------------------------

                                           $ 228,941   $ 235,862   $ 234,215

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Earnings (Loss)
    and Retained Earnings

    -------------------------------------------------------------------------
    Unaudited                       Three Months             Six Months
    ($000's except per                  Ended                   Ended
     share amounts)                    June 30                 June 30
                                  2010        2009        2010        2009
    -------------------------------------------------------------------------

    REVENUE                    $  19,357   $  17,881   $  52,592   $  59,577
                              -----------------------------------------------
    COSTS AND EXPENSES
      Operating and
       maintenance                12,935      10,949      34,625      36,099
      Depreciation                 4,145       2,667      10,801       9,247
      Selling and
       administrative              3,170       3,661       6,818       8,057
                              -----------------------------------------------
                                  20,250      17,277      52,244      53,403
                              -----------------------------------------------
    REVENUE LESS COSTS AND
     EXPENSES                       (893)        604         348       6,174
                              -----------------------------------------------

    OTHER INCOME (EXPENSE)
      Interest income                252          73         374         288
      Gain on sale of joint
       venture interests in
       rigs and other assets          46          58          46          79
      Gain (loss) on foreign
       currency translation           22         (97)         22         (95)
                              -----------------------------------------------
                                     320          34         442         272
                              -----------------------------------------------
    EARNINGS (LOSS) BEFORE
     INCOME TAXES                   (573)        638         790       6,446
                              -----------------------------------------------

    INCOME TAXES
      Current                       (147)        332         830         666
      Future                         141        (249)       (488)      1,317
                              -----------------------------------------------
                                      (6)         83         342       1,983
                              -----------------------------------------------

    NET EARNINGS (LOSS)             (567)        555         448       4,463
                              -----------------------------------------------

    Retained earnings,
     beginning of period         175,891     175,510     176,153     172,878
    Dividends declared            (1,275)     (1,276)     (2,552)     (2,552)
    Adjustment on repurchase
     and cancellation of
     share capital                (1,137)          -      (1,137)          -
                              -----------------------------------------------
    RETAINED EARNINGS, END OF
     PERIOD                    $ 172,912   $ 174,789   $ 172,912   $ 174,789
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per
     Class A and Class B share
      Basic                    $   (0.03)  $    0.03   $    0.02   $    0.24
      Diluted                  $   (0.03)  $    0.03   $    0.02   $    0.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Cash Flow

    -------------------------------------------------------------------------
    Unaudited                       Three Months             Six Months
    ($000's)                            Ended                   Ended
                                       June 30                 June 30
                                  2010        2009        2010        2009
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net earnings (loss)        $    (567)  $     555   $     448   $   4,463
    Non-cash items included
     in net earnings (loss)
      Depreciation                 4,145       2,667      10,801       9,247
      Future income taxes            129        (432)       (500)      1,134
      Expense for defined
       benefit pension plan           25          18          49          36
      Stock options charged
       to expense                     72           -          72           -
      Gain on sale of joint
       venture interests in
       rigs and other assets         (46)        (58)        (46)        (79)
                              -----------------------------------------------
    Funds flow from
     operations                    3,758       2,750      10,824      14,801
    Change in non-cash
     working capital              12,938       9,769       3,222       8,976
                              -----------------------------------------------
                                  16,696      12,519      14,046      23,777
                              -----------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures          (6,319)       (988)     (7,923)     (8,346)
    Reduction in cash
     restricted for loan
     guarantees                        -           -       2,500           -
    Proceeds on sale of joint
     venture interests in
     rigs and other assets           105         141         105         190
    Change in non-cash
     working capital               2,851      (1,359)        554           -
                              -----------------------------------------------
                                  (3,363)     (2,206)     (4,764)     (8,156)
                              -----------------------------------------------
    FINANCING ACTIVITIES
    Increase (decrease) in
     bank indebtedness                 -           -           -           -
    Dividends paid                (1,275)     (1,276)     (2,552)     (2,552)
    Proceeds received on
     exercise of stock
     options                          32          32          32          47
    Repurchase of share
     capital                      (1,346)          -      (1,346)          -
    Change in non-cash
     working capital                   -           -           -           -
                              -----------------------------------------------
                                  (2,589)     (1,244)     (3,866)     (2,505)
                              -----------------------------------------------
    FOREIGN CURRENCY
     TRANSLATION                     (12)       (384)        (25)       (252)
                              -----------------------------------------------
    INCREASE IN CASH              10,732       8,685       5,391      12,864
    Cash position, beginning
     of period                    28,801      46,347      34,142      42,168
                              -----------------------------------------------
    CASH POSITION, END OF
     PERIOD                    $  39,533   $  55,032   $  39,533   $  55,032
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid during the
     period                    $       1   $      45   $       3   $      52
    Income taxes paid during
     the period                $     695   $   1,310   $   1,153   $   2,071
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Comprehensive Income (Loss)

    -------------------------------------------------------------------------
    Unaudited                       Three Months             Six Months
    ($000's)                            Ended                   Ended
                                       June 30                 June 30
                                  2010        2009        2010        2009

    -------------------------------------------------------------------------


    NET EARNINGS (LOSS)        $    (567)  $     555   $     448   $   4,463

    OTHER COMPREHENSIVE
     INCOME (LOSS)
      Foreign currency
       translation
       adjustment                    (12)       (384)        (25)       (252)
                              -----------------------------------------------
    COMPREHENSIVE INCOME
     (LOSS)                    $    (579)  $     171   $     423   $   4,211
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

FORWARD-LOOKING STATEMENTS

From time to time Akita Drilling Ltd. ("AKITA" or the "Company") makes written and verbal forward-looking statements. These forward-looking statements include but are not limited to comments with respect to our objectives and strategies, financial condition, the results of our operations and our business, our outlook for our industry and our risk management discussion. Forward looking statements are typically identified with words such as "believe", "expect", "forecast", "anticipate", "intend", "estimate", "plan" and "project" and similar expressions of future or conditional events such as "will", "may", "should", "could" or "would".

By their nature these forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not be achieved. We caution readers of this News Release not to place undue reliance on these forward-looking statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.

Forward-looking statements may be influenced by the following factors: the level of exploration and development activity carried on by AKITA's customers, world oil and North American natural gas prices, weather, access to capital markets and government policies. We caution that the foregoing list of important factors is not exhaustive and that when relying on foregoing factors as well as other uncertainties and events.

%SEDAR: 00002868E

SOURCE AKITA Drilling Ltd.

For further information: For further information: Murray Roth, Vice President, Finance and Chief Financial Officer, (403) 292-7950, website: http://www.akita-drilling.com


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